US demands public say on Kenya tax, trade rules

The National Treasury building in Nairobi.  

Photo credit: File | Nation Media Group

The US is demanding that Kenya grant traders and the public a bigger say in regulatory changes to safeguard their rights, including accommodating their views and granting them sufficient time to comply.

In a newly published text in the ongoing negotiations for new trade and financing deals with President William Ruto’s government, the US wants transparent and realistic public participation in regulatory changes.

“The proposed text stems from the United States’ recognition that early information about planned regulatory actions through the use of regulatory agendas allows interested persons to engage with regulatory authorities, thus providing more time to prepare to comply,” the US government said.

“The text also includes core provisions on the transparent development of regulations, such as publishing draft regulations and allowing adequate time for comments to be considered. Public consultations on draft regulatory measures can contribute to better regulations, as regulators do not always have complete information to anticipate the impact and consequences of regulations,” it added.

The demands by the US come amid growing concern by traders and citizens about random regulatory changes, including tax and trade policies and financial regulations that affect business and livelihoods.

For instance, the Kenyan government has come under pressure over a raft of recent tax changes through the Finance Act 2023, including the doubling of value-added tax on petroleum products and a new housing development levy, charged at 1.5 percent of gross salaries and matched by employers despite public protest.

Apart from the housing levy that has generated a lot of debate, including a protracted court case, a number of taxation reviews have left Kenyans worse off, partly with the pace at which they have been proposed and introduced.

Soon, Kenyans will contribute more for public insurance whose premiums will rise several times at a time when salaries have remained stagnant.

The State’s subsequent tax proposals contained in the draft Medium Term Revenue Strategy have equally drawn sharp critiques from the public amid concern that their views are never captured despite the regulatory changes that are steamrolled through Parliament.

The Medium Term Revenue Strategy (MTRS) policy document has, for instance, proposed the scrapping of reliefs under pay as you earn, setting the stage for further cuts to take-home pay.

Currently, salaried workers enjoy two types of tax reliefs on PAYE— a Sh2,400 monthly personal relief for all resident individuals while the salaried who have paid insurance premiums for life, health, or education policies for themselves, spouses, or children enjoy a relief of 15 percent paid up to a maximum of Sh60,000 per year. The education and health policy must, however, have a maturity of at least 10 years to qualify for tax relief.

Businesses have also not been spared regulatory hits, including intermittent raises on export tariffs or bans on exports or imports of items such as maize, macadamia, and avocado. For instance, in October 2023, Kenya’s domestic agricultural production exceeded projections. In response, the Kenyan government issued an import ban on maize and wheat imports and stopped issuing import permits.

The US government now wants Kenya to improve and respect public participation in regulatory decisions.

It says "the proposed text includes several articles relating to information that can aid regulatory decision-making. For example, there is an obligation for regulatory authorities to prepare guidance or establish mechanisms on using the best available information and data when planning regulatory actions.”

The US further urged Kenya to upload all proposed regulatory changes on a common online platform for ease of access across the globe.

“Because regulations can have a cross-border impact, the proposed text contains an article on transparent access to regulatory information, which recognizes that the use of information technology tools can expand online access to relevant information, including information about registries of existing laws, the procedural requirements of regulatory authorities, websites where draft regulations are posted and comments accepted, and the acceptability of electronic documentation, where appropriate,” it said.

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